Volume 47, Issue 3 - April 2008
In the News
Company Generates Energy
The past couple of years have been filled with challenges for most businesses related to lumber and building materials. The green movement and all of its perplexing details, a slower housing market and a recent credit crisis—all of these elements have converged and require business owners to search out ways of remaining competitive. Many have faced the unfortunate necessity of layoffs and even closure. Rough and Ready Lumber Co., a Cave Junction, Ore.-based producer of lumber and millwork, discovered a way to deal with all of these issues—at once.
Rough and Ready recently flipped the activation switch on a new 1.2-megawatt boiler and generator. The new equipment will produce enough steam to operate the company’s two sawmill operations and lumber drying kilns, while generating and feeding enough clean, renewable energy back into the local power grid to power as many as 750 area homes. Link Phillippi, the company’s president and general manager, says this is about prospering in today’s business climate, while preserving and giving back to the local environment.
“The Illinois Valley is a small, rural and economically depressed part of Oregon and we need successful, small family-owned businesses to make it thrive,” Phillippi said.
The company’s new operations will not only provide security for its 85 current employees, but will add as many as 12 positions.
In 2005, Energy Trust of Oregon Inc., a nonprofit organization dedicated to promoting energy efficiency and clean renewable energy in Oregon, launched a Biopower program. Energy Trust filed a formal request for proposals, hoping to lure in projects that would be fueled by wood waste, landfill gas, manure or just about any byproduct. Rough and Ready Lumber responded. In the end, the company was granted an Energy Trust incentive of $1.7 million.“
This project is a ‘win’ across the board,” said Adam Serchuk, Biopower program manager for Energy Trust. “It generates power from sawmill waste that would be burned anyway, plus material that raises the risk of forest fires. It provides the steam needed for the sawmill’s operation, and the byproduct is clean, renewable electricity that goes right out to other Pacific Power customers.”
Rough and Ready’s previous system used a wood-fired, low-pressure steam boiler that did not produce electrical energy in the process. Phillippi had been looking for the right opportunity to invest in technology to make his business both more efficient and more competitive.
“We are going to be generating clean renewable power, preserving healthy forests and bolstering our local economy,” Phillippi said. “It’s good all the way around.” New equipment includes a high-pressure boiler, a back pressure turbine generator, boiler mechanical and electrical controls, fuel handling and storage equipment and air quality control features. The project is designed to increase steam production for the lumber-drying process while producing clean, renewable power from the burning of sawmill residuals. The system will require 30,000 tons of burnable material per year. Approximately half is expected to come from sawmill waste and the rest will come from fuels treatment and thinning operations on nearby public and private forests, of which Rough and Ready manages approximately 30,000 acres of its own.
“Until now, the cost of capital for a project of this type was just too high for a small business like ours,” Phillippi said in August of 2006. “With the Energy Trust incentive we can offset some of the costs of the project … We would have had a hard time getting this project off the ground without the incentive.”
The total cost of the project was $5 million. In addition to $1.7 million from the Energy Trust, Rough and Ready applied to the Oregon Department of Energy for a Business Energy Tax Credit of $1.25 million, or 25.5 percent of eligible project costs. After incentives and tax credits, Phillippi estimates that the project will pay back its cost in energy savings in four years. —DV
Associations Suggest Compensating Moves
With the second half of 2008 quickly approaching, following a less than stellar start for the new housing industry, many are searching for jump-start solutions. The National Association of Home Builders (NAHB) believes a tax credit for home purchases may be part of the solution. The National Association of Realtors (NAR) expects improvements in the second half of 2008, if conventional loan limits are increased. Both organizations maintain that improvements could be had, if the right incentives are put in place.
“The biggest bang for the buck most likely would be provided by a temporary home buyer tax credit,” says NAHB’s chief economist David Seiders.
Seiders recently addressed the Senate Finance Committee with these matters. “Tax credits for the purchase of a home are a means of eliminating excess inventory, relieving some of the pressure on falling housing prices and ending the waiting-on-the-sideline strategy some potential buyers have adopted in response to overly negative media stories concerning the future of the housing market.”
Seiders maintains that the recently enacted Economic Stimulus Act of 2008 could fall short of achieving its intended results, because it does not address the problems posed by the housing contraction. He also suggests that these problems press beyond just housing and are at the root of today’s economic and financial market problems. He says we haven’t seen the bottom yet.
Lawrence Yun, NAR chief economist, says his association expects sales activity to remain soft through the first half of the year, despite a generational low in mortgage interest rates, but the year could be salvaged if conventional loan amount limits are raised. He also agrees that buyers are lurking on the sidelines, waiting for the right incentives or market signals.
“Household formation was only half of what it should have been last year given the demographics of a growing population and sustained job growth, so there clearly is a pent-up demand from buyers who are on the sidelines,” Yun says. “Existing-home sales have moved narrowly since last September, but when the full impact of higher loan limits for conventional mortgages begins to impact the market there is likely to be a notable rise in home sales and prices.
If higher limits are enacted very quickly, we’ll see a faster and more meaningful recovery by expanding safe, affordable financing in high-cost areas, that, in turn, would help to stimulate overall economic activity.”
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